September 30, 2013

It is very easy to allocate funds and develop a strategy for innovation within an organization, however it is very difficult to make it successful and keep the interest of innovators. If innovation program is not managed well then it loses its importance in very short period of time. While implementing innovation program, there are many challenges such as operational, financial and resources, etc. However, ten main challenges for sustainable innovation management are discussed as following.

1. Innovation Governance is the key for major decision making, such as acceptance of an idea for incubation, funding of an idea and marketing of finished product or service. Innovation governance should have decision makers from various functions of an organization as well as from outside of the organization. It should also have subject matter experts. This varied group helps to select the best ideas for incubation. They also decide the funding required and helps to calculate the risk associated with the innovation idea. The challenge for innovation officer is to define most effective governance structure and proactive members for various roles of governance.

2. Innovation Team is essential to execute the innovation program. This team must have entrepreneurial mindset. Thus, they have to be psychologically assessed on their entrepreneurial skills before they are selected for various roles of innovation office. These team members should have varied experience and skills. Identifying such team is a serious challenge for chief innovation office as entrepreneurial quality people are few.

3. Innovation Process has to be very simple and transparent. There should not be delay/gap between two connecting processes. For example, after submission of an idea by innovator, its result has to be declared in very short time. Otherwise, innovator usually loses interest and rarely pursues idea to the next level. Also, chances of innovator to participate again are rare. Thus, innovation processes should speed up the procedure and not to hurdle the innovation program. Also, numbers of processes have to be minimal. Innovation office has to work like a startup. Thus, has to be more informal in processes and quick in action. Therefore, innovation officer has to manage the balance between organizational formal set of processes and informal set up of innovation office. Automated innovation program management portal is very useful for managing innovation processes.

4. Innovation Tools are essential for training of innovators. Very first time, innovators mostly fail to realize the concept of innovative idea. Thus, their ideas are unrealistic or less valuable to the organization. Many participants are enthusiastic to contribute in innovation program but may not be able to understand how to participate because they face challenges in generating ideas. Thus, innovation tools come handy for innovators. These tools help them to make their idea more powerful and useful to the organization. There are many tools available. But, the real challenge for innovation officer is how to train innovators on these tools. It is very difficult to train every interested person in class room. Therefore, best way is to use online learning.

5. Idea Selection for incubation is the process after idea submission by innovators. In this step, every idea is thoroughly investigated for its possible business potential and investment required. As investment is required in incubation and commercialization of an idea, every idea has to be analyzed on various risky parameters. Usually idea selection model is used to quantify the potential of an idea. Thus, innovation officer has to see that idea selection model is well defined and customized according to the need of domain and organizational business needs.

6. Innovation Portfolio has to be well balanced with combination of ideas having low (L) risk, medium (M) risk and high (H) risk. More the risk better is the rewards. However, more risk also leads to chances of investment loss. Thus, innovation officer has to define initial portfolio with lower risk and has to transform it to moderate risk portfolio over a period. Thus, first innovation portfolio should look like 10-20-70; it mean that 10% resources allocation for high risk projects, 20% for medium risk and 70% on low risk projects. After transformation, new portfolio should have more projects from both medium risk and high risk. Thus, new innovation portfolio should be 15-35-50 or 15-45-40 on H-M-L risk. The challenge for innovation office is to select the best proportion of projects of various risks, which suits the organization.

7. Rapid Prototype is the key in assessing the idea quickly and also reduces time required to take the idea to market. Agile methodology has to be adopted to develop the quick prototype of an idea. It reduces the investment required and gives better picture of an idea in a short period of time. It also reduces the risk because the idea can be judged before going into full-fledged production. Survey can be conducted on prototype to understand an acceptance of idea by customers. If the idea is well accepted by customers then prototype is transferred for production otherwise idea can be scrapped, thus it reduces further investment. The challenge for innovation officer is to select tool(s) and methodology for quick development of prototype with less investment.

8. Rewards and Recognitions is the integral part of innovation program. It attracts innovators for participation as well as it is the way to recognize their contribution. Though, the overall structure of rewards and recognition has to be in parallel with an organization policy, but considering the importance of innovation and psyche of participants, it has to be tweaked to match their interest. It is essential to give rewards or recognitions at each stage of innovation process. This keeps participants involvement very high. The challenge for innovation officer is to decide the rewards and the recognition given which will appeal the innovators. Officer also has to balance the organization's rewards and recognition policy and rewards given to innovators.

9. Innovator Engagement tactics keep innovator's participation high in the innovation program. Better engagement is possible only by transparent and automated processes. Innovators also have to be supported for idea elaboration and should be allowed to lead their ideas if selected for incubation. The innovation officer has to identify and implement all possible means to keep innovators engaged. Rewards and recognition also helps keep them engaged.

10. Success Measurement of innovation program is necessary as organizations are investing into program. Hence, they are interested to know how innovation program is effective within the organization. Challenge for innovation officer is to define the best measurement method. While defining measurement method, innovation officer has to decide the combination of non-financial and financial parameters for measurement. The non-financial parameters are very important during the early stages of innovation program. Also, it is essential to note that success measurement has to be aligned with the purpose of innovation program. Linking success only with the return on investment is most likely to showcase as failure of innovation program, which is not always true because many in-tangible benefits can be realized through innovation program.

Deciding an innovation portfolio is one of the big challenges for chief innovation office. It involves deciding about which innovation ideas have to be incubated, considering the investment required and risk involved in every idea.

Every potential idea may look like a gold mine which may change the fate of the company. However, it may not be always true because there is a risk of failure in every idea. Thus, before investing into an idea, it is required to assess an idea to manage the investment risk. Adoption of portfolio approach for incubating ideas is a better way to manage the investment risk.

Innovation portfolio should typically look like a combination of multiple ideas of low, medium and high risk. We can use the analogy of A-B-C rule where, A stands for bucket of projects of high risk, B stands for bucket of projects of medium risk and C stands bucket of projects of low risk.

Organizations should have their initial innovation portfolio based on A-B-C- or H-M-L Rule. Thus, initial innovation portfolio should look like:

A or H Bucket of Projects: This is a bucket of high risk innovation projects. These projects are usually radical/transformational and mostly new to industry. These projects are focused on developing new generation products or services, and usually use emerging or very new technologies. Being high risky projects, the numbers of projects are limited to few so that sufficient attention can be provided to control the risk and maximize return. Return on investment on this bucket of projects can give up to 60%, while which resources allocation can be up to 10% of total resources/efforts used in innovation.

B or M Bucket of Projects: This is a bucket of medium risk projects. These innovation projects are mostly new to organization and focuses on development of products or services those are new to the organization but known to industry. These projects usually leverage existing technologies. Considerable return can be expected from this bucket which may rise up to 25% and resources allocation can be up to 20% of total resources/efforts used in innovation.

C or L Bucket of Projects: This is a bucket of low risk projects. Resources allocation can be 70% of total resources/efforts used in innovation. These projects are usually incremental changes in existing products or services of the organization. Thus, risk is very low; hence, return on investment is also not much and may be up to 15%. Many times benefits may be non-financial or in-tangible. The use of technologies is restricted to mature and well accepted technologies.

How to allocate the project into L, M or H bucket is a critical task. Organization can have their own model for allocation of the project into their respective buckets. While developing the model, following parameters and questions can be used:

Novelty: What is novelty of an idea?

Market: What is market size of an idea?

Customer: What is the benefit to a customer?

Growth: How is it supporting the growth of the organization?

Allocation of resources: What are the resources required?

Investment: How much is the investment required?

Return on investment: How much is expected return on investment? Is it tangible or intangible?

Competition pressure: Is there any pressure because the competitor has adopted it?Risk: How much risk is involved?

Technologies Used: What kind of technologies are required to develop an idea and, are those mature?

Aggregated reply to the above questions on certain measurement scale will help to allocate project to any one of the buckets H,M, or L.

During initial phase of innovation, typically innovation portfolio may have maximum number of projects of incremental changes or low risk. These types of projects will never generate expected growth from the innovation portfolio, thus portfolio has to be transformed over a period from low risk to medium risk.

As organization matures on innovation, it should systematically analyze innovation portfolios and manage risk to increase the proportion of innovation projects having more risk and more rewards. Thus, H-M-L portfolio should not look like 10-20-70 or low risk portfolio. The new portfolio should have more projects from medium risk and from high risk. Thus, new innovation portfolio should be 15-35-50 or 15-45-40 on H-M-L risk.

Periodically or every year organization should evaluate their innovation portfolio to see the ratio of H-M-L. It should neither be in low risk zone nor be in very high risk zone. Having low risk or very high risk in innovation portfolio may always lead to failure of innovation program.

References:

Day, G. S., (2007). Is It Real? Can We Win? Is It Worth Doing? Managing Risk and Reward in an Innovation Portfolio. Harvard Business Review, December, pp. 110-120.

Ever since the first TV broadcast happened in late 1930s, the penetration, choice of content offered, and average viewing hours per day has gone up and so has the cable subscription fees. The turning point in the industry came in 1995 with the delivery of first ever TV program via internet. Nearly two decades after that, internet TV, VOD (video on demand), YouTube, Netflix, Hulu etc. have penetrated the market but the TV industry is still doing its business in the same manner. However, some recent developments in the market with the entry of players like Aereo suggest that it's time for the long impending change in business models.

Let's just briefly check who the players are and what the flow of money presently is-

Multi video programming distributors- MVPDs are cable companies and DTH (direct to home) satellite TV providers like Dish TV. They earn their monies through the subscription fees paid by the consumers and local advertising revenue. They buy programming content or channel bundles from the networks.

Networks- Networks like Viacom provide programming content in the form of channels with TV shows. Usually networks give a "bundle" of channels to MVPDs for which MVPD pays affiliate fees. So it's the networks which make channel bundles not the Pay TV companies.

Over the top services (OTT) - OTT is the term used for web based or broadband delivery of video and audio without a set top box. It includes Netflix, Hulu, Itunes, Amazon etc.

Then there are 3rd party OTTs which include the likes of Google and Apple TV. These are on demand boxes which enable delivery of content on your TV or computer, tablet, phone etc.The OTTs either charge a subscription fee (e.g. Netflix) or pay per view (e.g. iTunes).

OTTs have been trying to cut licensing deals with networks in order to populate their libraries with desired content. The challenge here is that the networks want to charge retransmission fee and sell "bundles" rather than a-la-carte.

Networks have long been the most powerful players in TV industry. On the other hand the OTTs are struggling to come up with a business model that would generate revenues for them and provide customers more choice (a-la-carte) at lesser cost along with mobility to consume content anywhere, anytime.

The company that looks like the game changer here is Indian innovator Chaitanya Kanojia's Aereo backed by media baron Barry Diller. It provides tiny antennas on rent which can pick up broadcasters free over-the-air signal and transmit them to an Apple TV or Roku device for as low as $8 a month. Consumers can watch live or record on a cloud based DVR (digital video recorder). The channels can also be streamed on computer, Ipad or Iphone. It doesn't carry all channels, but only those that are broadcast over the air (does not carry "cable only" channels) and it does not pay any retransmission fees to networks like cable companies and other OTTs do.

Major broadcasters, including NBC and Fox, filed a case against Aereo in New York, alleging that Aereo's technology is copyright infringement, but court ruled in favor of Aereo, while in Los Angeles Aereo lost a similar case. There are chances that the litigation might end up in Supreme Court or the congress in which case the broadcasting laws will have to be changed. As of now Aereo's services are available in New York and Aereo is planning to reach 20 cities in the first expansion phase.

Aereo's future is not clear but its entry sure has disrupted the status quo. While the big broadcasters like CBS are considering pulling their signals off the air and go cable only, cable companies like Time Warner who were paying retransmission fees to the networks till now are considering using similar technology as Aereo. All this can lead to huge revenue losses for broadcasters.

Customers want mobility in consuming content and to pay only for content they actually consume, Aereo gives them this choice. Early adopters have already picked it up and seems like the industry is on the verge of the next big change which will make the broadcasters rethink on new ways to distribute content.

September 27, 2013

Innovator usually has two questions - Is my idea innovative? The answer is simple- YES, but at the same time organization may or may not accept it for incubation. Thus, innovator has next question- How organization select the idea for incubation.

Dictionary meaning of innovation is something new, may be a new method, process or a product, etc. Thus, innovative idea has to be new. When we say an innovative idea or a new idea, we always think about a path breaking idea or a very unique idea which never existed in this universe. However, this common perception is untrue. Are we looking for innovation or invention? In an invention, we look for something new which never existed, while in an innovation newness has an importance but it may exist somewhere else and not in the current context of idea. Innovation can't be an invention rather it is smart adoption of invention. One of the best and the most commercially successful nature inspired invention- Velcro is biommicry of burdock burrs. This invention has innovatively used in various products and we always see new innovations of it. Thus, Velcro is a single invention and has used in multiple innovations.

There are many such examples of innovations which are derived from inventions. Most of us believe that touchscreen based mobile is the best innovation. Is touch-screen an innovation? No, touch screen technology was invented in 1965, and it is in the use since then for various purposes. Some of us might have seen touch screen based Kiosk before the launch of touch screen based mobile. Then, what is the innovation in touch screen based mobile; and the answer is - replacing physical keypad by touch screen to improve user experience. Thus adoption of technology for better experience is the real innovation. Another good example is LED. They are in the market since 1968 and since then we have seen many innovations around them. The recent one is adoption for house/office and car lighting. Thus, innovation necessarily need not be invention.

Innovative idea can also be the smart implementation of things from the other fields. Use of camera and social media in a mobile is the best example of innovation which integrated two known different technologies. It helped user to take a picture and upload immediately on a social media site. E-commerce is the good example of better implementation of the same idea. Amazon used it successfully and made it popular though it was in use before Amazon. Some innovations are also adopted from the nature. Most innovative aerodynamic designs of automobiles are inspired by nature.

Therefore, apart from the dictionary definition of an innovative idea, it can also be defined as any existing idea which is new in the context of its use.

By this definition, organization may not always accept and invest in new ideas. Organizations will always look for some qualifier to nominate an innovative idea for incubation. This qualifier is an opportunity in pursuing the idea. The opportunities are mostly financial or nonfinancial. After using touch screen into mobiles, the handset manufactures earned a lot of money. This is a clear case of financial benefits. However, improving the processes within the organization for the speedy approval of employee's welfares may be nonfinancial benefit for the organization but positive impact on the productivity because of the employee's happiness is the real benefit for the organization. When an organization is looking for a new idea, it is mostly judged by the size of opportunity or impact of an idea over a business and a customer, and infrastructure readiness of the organization. Every organization has its own model for calculating size of opportunity or impact of an idea over a business.

If organization is ready for accepting the innovative idea then the next question is, how and who will pursue it in the organization. The answer is simple- it depends on the size of opportunity or impact of an idea over a business. If opportunity or impact is huge then organization usually pursues it on the high priority and may be incubated centrally or at unit level. If opportunity or impact is not so great but organization has advantage if implemented and also investment required is also manageable, then idea is implemented as a routine work. Mostly incremental changes are implemented through regular channel rather than innovative idea. Sometimes, idea may be implemented without considering an opportunity or impact because competitor has implemented it or it is pursued as an edge over the competitors.

Thus, innovator has to understand the two set of questions to overcome the dilemma

Idea: Is the idea new? Is it completely new or adopted from other areas? What is it the best way to adopt a new idea?

Idea Buying by Organization: Why organization should adopt the idea? Who will be benefited from the implementation of your idea? Why is this idea important for the organization? What is the size of opportunity? What is the impact on business? Is it financial or nonfinancial gain to organization?

The last and most important question is: Will you start your startup with this idea? If answer is yes, then there is high probability that your idea may be accepted for incubation by the organization.